Now that bank cards with microprocessor chips have made their debut, more details are coming to light about how the new smart card programs will work, as well as how Visa, which has driven much of the recent activity, envisions the course of events.
As the Smart Card Forum holds its eighth annual conference today and Thursday, these new programs will probably be described as jolts of energy in what has become a fairly phlegmatic credit card market.
The Internet has clearly emerged as the spark. All the applications that Visa has built into its smart card platform are useful for e-commerce (though some, like the payment function, would be equally useful offline). Since smart card readers are not standard equipment on personal computers, the fact that banks issuing chip cards are giving away these devices signals their view that the cards will be the chicken that comes before the egg.
Smart card issuers are looking forward to the day that they do not have to give customers the physical equipment to use the products.
"Neither Visa nor its member banks want to be in the hardware business," said Al Banisch, senior vice president of consumer credit products at Visa U.S.A., as he and a colleague demonstrated how a Gemplus GCR410 reader facilitated transactions on a smart Visa card. "It raises customer service questions, among other things. But as more and more Americans start coming out with cards, there will be more incentive for the computer manufacturers to accommodate them."
All the major computer makers sell some products with chip card slots built in, but the feature is optional and not widely requested. "The PC industry has had the smart card slot recommended for the last three years or so," said Charles Cagliostro, executive director of the Smart Card Industry Association in New York. When the next set of industrywide specifications comes out, he said, "our hope is that it goes from recommended to required."
Mr. Banisch of Visa, who joined the association a few months ago after a career marketing ketchup for H.J. Heinz Corp., says his new mission is to "commercialize this technology" so that not just computer makers but also banks, merchants, and consumers become sold on smart cards.
"We're approaching this very differently than the competitor did," said Mr. Banisch, referring to American Express Co. and its Blue card. "We are selling a platform rather than a product. Our platform works with all types of cards."
Certainly, there are compelling reasons for banks and merchants to welcome the Visa smart cards, which come loaded with payment and authentication capabilities, a loyalty application, and an access function.
"From the issuer's standpoint, I see the potential for making cards 'stickier,' " said Mr. Banisch, using an Internet term that is synonymous with customer loyalty. If someone has a smart card that is already loaded with lots of personalized applications, "it's harder to switch when you get the latest low-rate offer in the mail," Mr. Banisch said. "This is an industry crying out for more differentiation."
Kimberly A. Lawrence, director of smart card applications and market development for Visa U.S.A., said merchants and banks alike will be attracted by what smart cards can do in the loyalty arena: People can download electronic tickets and coupons and spend them online or in the real world. For merchants, the authentication feature makes transactions less risky and potentially less expensive.
"We've tried to get this feature-rich, to get some of our banks thinking about what they could do," Ms. Lawrence said. "Merchants don't have to do anything to their Web sites to accept these cards, and for consumers, the key is the combination of the access, pass code, and payment information being stored on the chip, not in a wallet."